If one thing is certain, it’s that there will always be disruption, which makes resilient supply chains an essential part of future-proofing, says Chris Laws of Dun & Bradstreet
Effective supply chains uphold the economy of most nations. The UK sector that has come to rely on this most of all is retail – an industry contributing several hundreds of billions of pounds to its economy each year. Yet in recent years, the ability for retail businesses to trade efficiently has been jeopardised.
Today’s rapidly growing global market has led to the creation of an immense and interdependent supply chain, unprecedented in its scope and complexity. Seismic events such as the pandemic, Brexit and geopolitical tensions revealed the pain-points of having such an interconnected global supply chain, and the need for retailers to ramp up digital transformation efforts of their supply chain to improve risk management, operate effectively and maintain equilibrium.
Although the call to accelerate digital transformation came amid drastic business and supply chain disruption, there’s a silver lining. For one, that transformation sped up the availability of and access to data, which in turn allows procurement professionals within retail organisations to make quick and accurate decisions, whilst still minimising risk.
At the same time, these digital enhancements will brace organisations for the continued economic pressures and rising energy costs, meaning they can pre-empt potential problems, operate with minimal disruption, while protecting the brand from reputational damage.
Minimising supply chain risk
Long before Brexit and Covid-19, businesses were plagued with challenges arising from having a limited view of their supply chains. A prime example is when branches of Nando’s up and down the UK ran out of chicken during the New Year’s bank holiday of 2017.
While, historically, disruption may have been due to a supply chain oversight, now, political, economic and even weather associated issues have a big role to play. In fact, recent data shows that 45% of companies reported a supply chain impact on their business.
Yet, there are lessons to be learnt in every given situation. What disruptions, recent or otherwise, have taught us is that not having a clear overview of your supply chains is a recipe for disaster. Even when the contributing factors impacting a retailer’s supply chain go beyond their control, there are still ways to have a holistic, transparent view, allowing for foresight and mitigation.
What retailers should consider
Retailers can minimise risk, ensure they’re working with more stable and sustainable suppliers, and use actionable insights to develop an informed supplier strategy by committing to the following:
- Developing a clear strategy – While it’s human nature to hope for the best, businesses must prepare for the worst. In a survey of more than a thousand procurement and supply chain leaders across a range of industries in the UK and US, almost all (99%) respondents say that Covid-19-related economic disruption had an impact on their procurement operations. This tells us that businesses must take their supply chain strategy seriously. And this can be done by developing a risk-based assessment process to identify a variety of risks that could impact the functioning of the supply chain and structure an agile network of suppliers that will facilitate adaption to shocks.
- Monitor for disruptions – In this step, supply chain managers should establish a comprehensive view of their supply chains to monitor any associated risks with suppliers across different stages of the supply chain – for example due to geographical disruptions, sanctions or ownership, or reputational factors. An increase in visibility will help to lower reliance on specific vendors and uncover valuable linkage details to better understand how suppliers are connected. Also, proactively monitoring suppliers by using advanced tech such as AI will be invaluable to business operations. This is true for the 37% of leaders in the report who say they have now automated certain tasks and invested in technology to support supplier engagement and their distributed workforces.
- Effectively use your data – Obtaining data from disparate systems, distributed teams and suppliers can be the downfall of any business. Organisations must invest in the right data and systems that can help make sense of it. This will help supply chain managers benefit from greater transparency into supplier networks and provide the insights needed to make informed decisions. The survey also supports this as almost half (40%) of leaders say improving data quality is key to how well their organisations will adapt to a post-pandemic business environment.
Using safer suppliers
Once the risks have been identified and accounted for, procurement professionals within retail companies can move on to using a similar process to identify their very own safe suppliers. This should be a diverse range of suppliers from various geographies to help protect companies against the unexpected, such as border disruption, natural disasters, political unrest, and regional sanctions.
There should also be supplier diversity in terms of the types of businesses retailers work with – from small business owned to veteran-owned businesses. It makes good business sense to have this diversity because these suppliers tend to be smaller and more agile, and these are qualities that can often lead to innovation.
Embedding ESG into the fabric of supply chains
As well as diversifying their supply chain, retailers now need to consider the ESG aspects of their supply chains. Consumers and investors are driving retailers to focus on sustainability, social impact, and governance – not only within their own operations but also in their supply chains. Retailers must take concrete and impactful action to create sustainable supply chains that meet the demand for more ethical goods and services.
From climate change and supporting communities, to financial steering and anti-corruption measures, ESG is all-encompassing. Wise retailers will already be factoring in these topics when conducting due diligence on business partners. Simply claiming to be “one of the good ones” is no longer enough; retailers must prove their ESG credentials.
Beyond reputational benefits, adopting ESG practices within their retail operations and supply chains can lead to better profits and growth, as well as lower risk. By closely examining ESG data, retailers can identify opportunities for reducing energy costs and other expenses, and drive sales and profits through innovation and improved risk management.
Actionable insights
To tie this all together, businesses need to tap into actionable insights – it’s critical for developing an informed strategy. With this, supplier diversification is much easier. For instance, organisations can then determine if they have a supplier in Tier 2 (their suppliers’ suppliers) that multiple Tier 1 suppliers are buying from. Without this insight, a false sense of diversification (i.e., single point of failure) is created.
Also, armed with information, supply chain managers can identify hidden risk patterns, such as if a business has multiple suppliers of critical components concentrated in the same risky geography, for example, Guangzhou in China is very vulnerable to floods.
The opportunity to identify regions will also play a major role in ascertaining if a business has a significant exposure to suppliers and the network of their suppliers in regions with rising political tensions.
There will always be disruptions beyond economic disruption, the pandemic and Brexit, so it’s essential that businesses build resilient supply chains to futureproof against unforeseen events. For any retailer to flourish, assessing risk at different stages of their supply chain and across multiple dimensions. Using insights derived from data to make informed decisions and strategise, is what will separate the wheat from the chaff in future.
About the Author
Chris Laws is Vice President of Product, Strategy and Go To Market for UK and Nordics at Dun & Bradstreet.
